November 2007

Plenty of Resources, But Even Greater Demand

The politics of military spending have reached fever pitch as Congress attempts to pass the Defense Department’s fiscal year 2008 budget and weighs massive war spending requests.

The debate over the budget, much like last year’s deliberations, has been overpowered by the politics of the war in Iraq, including various legislative efforts to mandate deadlines for troop withdrawals and shorten deployments.

These are legitimate issues for Congress to deliberate, but they should not be an excuse for delaying the appropriation of critical funding that the military services need, not just to fight the war, but also to sustain day-to-day operations at home and around the world.

In addition to President Bush’s defense budget request of $483 billion for the fiscal that began Oct. 1, lawmakers are mulling over a record-high $190 billion request for military operations in Iraq and Afghanistan.

These are unprecedented levels of defense spending. But Congress must also recognize that the demand for resources has never been higher. It also must consider that the longer it takes to appropriate the funds, the more difficult it gets for the services — particularly the Army and the Marine Corps — to do their jobs. It is worth recalling that last year, the Army had to “cash flow” war operations for several months — and even borrow funds from the Air Force — until Congress got around to passing an emergency request.

Once again, the military services are being forced to shuffle resources around to keep things running in the absence of a fiscal 2008 budget and war appropriations. Not only does this create accounting nightmares for the services but it also disrupts important activities, such as training and temporary-duty travel, which cannot be easily restored months later.

There has to be a timely resolution of these budget matters.

Additionally, Congress must find a way to set aside the contentious and politically charged issues that surround the Iraq war and begin to think about the larger financial challenges that confront the Defense Department.

Notwithstanding the substantial increases seen in defense budgets since 2001, expenditures seem to grow at an even faster pace. And even if a troop drawdown began in the near future, the war’s strain on the budget will continue for years after U.S. forces leave Iraq.

The Congressional Budget Office estimated that the total cost of ongoing military operations in Iraq and Afghanistan between now and 2017 — depending on the level of troop commitments — could range from $1.09 trillion to $1.62 trillion.

The cost of replacing equipment is a major unknown. Even though the Army already has forecast $13 billion a year in “reset” costs to repair weapons and vehicles, the bill could be much higher, contends the Government Accountability Office.

Personnel costs will be huge. The expansion of the Army and the Marine Corps by 92,000 troops is expected to cost $110 billion during the next five years. Escalating demands for military health care — both for wounded troops and retirees — will continue to strain the budget.

Another major financial concern is the implementation of the services’ long-term force structure, readiness and modernization plans. The competition for procurement dollars, particularly, will intensify as all the services launch major efforts to recapitalize aging fleets and transition to next-generation weapon systems.

Due to cost growth in major acquisition programs, it is likely that substantially higher levels of funding will be needed than is currently budgeted to execute the services’ plans over the long term, analysts point out. According to CBO, implementing the services’ defense plans could require increasing annual funding in the base budget by some $65 billion above the level currently projected for fiscal year 2013.

It would be unrealistic to expect defense budgets to keep rising and to eventually not be crowded out by other national priorities, such as reducing the federal debt, ensuring the health and durability of Social Security and Medicare, and providing greater resources for education, health research and other domestic programs.

The long-term federal budget picture has dramatically worsened over the past six years, says a study by the Center for Strategic and Budgetary Assessments. Unfortunately, it is likely that the outlook will deteriorate still further in coming years. Projections for the years beyond 2017 are far worse. Deficits are projected to become much larger after members of the baby-boomer generation begin retiring at the end of this decade. This change in demographics has enormous implications both for federal spending and revenue generation.

These bleak fiscal projections, says CSBA, do not prove that the administration’s proposed funding increases for defense are not sustainable over the long run. But they suggest that sustaining these increases could be difficult, and will likely require making hard choices between defense and other priorities.

Simply put, the squeeze on resources will get tighter, even as budgets remain high in the near term. The question is precisely how long we can continue to cram too many demands into the defense budget before we witness the fiscal train wreck that so many analysts have predicted for many years.